WebMD Corp., a company that once spun an elaborate vision of information integration across the healthcare industry, set its sights last week on buying into the nuts-and-bolts business of mailing insurance checks on behalf of payers and communicating coverage and payment decisions to providers and consumers.
Elmwood Park, N.J.-based WebMD agreed to acquire Advanced Business Fulfillment, a St. Louis-based firm specializing in the tail end of the claims process, for $110 million in cash upfront and up to $150 million in future payments, depending on how extensively the acquired business contributes to WebMD's earnings.
Founded in 1998, Advanced Business Fulfillment said it has grown at an average of nine new administration contracts per month for the past three years and now serves more than 300 healthcare insurance companies, managed-care organizations, third-party administrators, self-insured companies and dental plans. In 2002, the privately held company reported pretax income of $8 million on $63 million in revenue.
"They're certainly a fast-growing company and we see a lot of synergies with them," said WebMD spokeswoman Jennifer Meyer. "It enhances our ability to work with our customers to reduce costs and improve this type of administration."
WebMD also was founded in 1998, but it harbored ambitions as the be-all for healthcare electronic and Internet communications, snapping up more than 30 companies during a three-year stretch but failing to make good on a promise to integrate them all in an "end-to-end solution" to the industry's high administrative costs. After two years of multibillion-dollar losses, the company began restructuring around physician practice-management automation and electronic health-claims processing.
The acquisition of Advanced Business Fulfillment, subject to regulatory approval, will augment WebMD's existing capabilities to process and send explanations of benefits and remittance advice to providers and insurance beneficiaries, Meyer said. WebMD's Envoy claims processing division, which logs more than 2 billion transactions per year, will give the acquired company a customer base to expand, she said. The transaction is expected to close early in the third quarter of 2003.
The service begins after a payer has adjudicated a claim and determined what it will pay. That information is fed electronically to Advanced Business Fulfillment, which assumes responsibility for sending the payment and associated claim information by whatever electronic or print method is requested by a healthcare provider.
The company said its highly automated and integrated operation generates savings of $50,000 to $2 million per year compared with a payer's costs of doing the work on its own.
WebMD has posted a quarterly net profit only once since becoming publicly traded in late 1999, and most of that came from a discontinued operation. In 2002 it reported a net loss of $50 million on revenue of $926 million.